Country Analysis Note

Mozambique has become one of the most promising countries in Africa in terms of natural gas and coal resources. There have been prolific natural gas discoveries in Mozambique's northern offshore Rovuma basin since 2010. Also, Mozambique's Tete Province is estimated to hold large untapped coal reserves of 25 billion short tons, according to the International Energy Agency. However, inland transportation and port capacity restraints may limit Mozambique’s coal production growth in the future.

According to the International Monetary Fund (IMF), coal and natural gas production could potentially increase Mozambique's economic growth rate by 2 percentage points annually during 2013-23. The IMF estimates that Mozambique grew by 7% in 2013.

Natural Gas

The Oil & Gas Journal released on January 1, 2014, raised Mozambique’s proved natural gas reserves to 100 trillion cubic feet (Tcf), up from 4.5 Tcf the previous year, placing the country as the third-largest proved natural gas reserve holder in Africa, after Nigeria and Algeria.

Mozambique currently produces a small volume of natural gas. In 2012, Mozambique produced 154 billion cubic feet (Bcf) of natural gas mainly from two onshore gas fields, Pande and Temane. The majority of natural gas produced in Mozambique was exported (127 Bcf) to South Africa via the 535-mile Sasol Petroleum International Gas Pipeline, and the remainder was domestically consumed (27 Bcf).

The U.S.-based Anadarko and Italy-based Eni are leading exploration activities in Mozambique’s offshore Rovuma Basin. Anadarko made several natural gas discoveries in Area 1 (Prosperidade and Golfinho/Atum complexes), amounting to an estimated 45 to 70 Tcf of recoverable gas resources. Eni’s natural gas discoveries are in Area 4 (Mamba complex and the Coral site), and recoverable gas resources are estimated to be more than 80 Tcf.

The Prosperidade and Mamba Complexes straddle the boundaries of Area 1 and 4, and unitization (joint development of reserves that are under separate licenses) between the overlapping areas is required under Mozambican law. Anadarko and Eni have agreed to a development framework for Prosperidade in which Anadarko is progressing with the initial development of two onshore 5-million-tons-per-annum (Mmtpa) (or 240 Bcf) liquefied natural gas (LNG) trains. The planned LNG facility will be located near Afungi in the northern Cabo Delgado Province. Eni is also considering building a 2.5-Mmtpa (or 120 Bcf) floating LNG facility in Area 4.

Anadarko recently announced that it signed non-binding long-term supply agreements with Asian buyers covering two-thirds of the capacity of the first 5-Mmtpa liquefaction train. First LNG sales are expected in 2019, although this date has been pushed back in the past.

Mozambique plans to hold a fifth upstream licensing round this year to offer acreage in the deepwater Rovuma Basin, Zambezi basin/Beira High, and the Mozambique basin.

Coal

In 2012, Mozambique surpassed Zimbabwe to become the second-largest coal producer in Africa, behind South Africa. Nonetheless, Mozambique's coal production is equivalent to less than 2% of South Africa's coal production.

Mozambican coal production increased to nearly 5.4 million short tons in 2012 from 42,000 short tons in 2010. In 2012, Mozambique exported 3.3 million short tons, which mostly went to Asia and South Africa, and domestically consumed 80,000 short tons.

Coal exports are transported from the inland Moatize coal mines (Tete Province) to the Beira port via the rehabilitated 360-mile-long Sena railway. Sena's capacity is roughly 6.6 million short tons (6 million metric tons) per year if fully operational, but its actual throughput is much less and trains cannot run at full speed. The Sena line's capacity has not been enough to accommodate the rapid production growth, forcing some companies to limit production and/or truck coal to the coast. There are plans to increase Sena's cargo capacity to 22 million short tons (20 million metric tons) per year by 2015. However, plans have repeatedly been delayed in the past.

There are several other infrastructure projects planned as well. The newest project scheduled to come online is the Nacala Rail Corridor project. It will connect the Moatize mines to the Nacala port via a 560-mile railway line (via Malawi), bringing online almost 20 million short tons (18 million metric tons) per year of coal transportation capacity. The project is expected to be completed in late 2014, according to the Mozambican government, with exports slated to start in 2015, according to Vale, the Brazilian company funding the railway line.

Other projects underway include: a new coal terminal at the Beira port, additional coal export terminals at Nacala, amounting to more than 44 million short tons (40 million metric tons) per year, and a new port at Macuse with a 325-mile-long railway line linking to the Moatize mines potentially transporting 22 million short tons (20 million metric tons) per year.

Electricity

According to the World Bank's latest data, 15% of Mozambique's population has access to electricity, although other sources placed the electrification rate at more than double that amount.

Electricity net generation in Mozambique was 16.7 billion kilowatthours in 2011, of which almost all was from hydropower and a very small amount from natural gas. The vast majority of the population relies on traditional biomass and waste (typically consisting of wood, charcoal, manure, and crop residues) for household heating and cooking.

Ncondezi Energy plans to bring online Mozambique's first coal-fired power station next to its coal mine in the Tete Province in 2014-15. Ncondezi is also building a larger power station, with the project's first 300-megawatt (MW) phase expected to be operational in 2018, according to SNL Energy. The plan is to eventually expand the station to 1,800 MW. Ncondezi Energy will use existing transmission capacity to send power to northern Mozambique. Other planned power projects include: the 100-MW natural gas-fired Maputo power station (expected in 2018) and Vale's 1,800-MW coal-fired power station.